Omnicom profits grow 11%

WilliamSpain

CHICAGO (MarketWatch) - Driven by robust growth in both traditional advertising and specialty marketing services, Omnicom Group reported an 11% bounce in third-quarter profit on a 9% revenue rise.

Before the start of trading Tuesday, Omnicom
OMC, -0.24%
said that it earned $161.7 million, or 90 cents a share, on the period. That's up from $145.3 million, or 79 cents, and 3 cents ahead of the average estimate of analysts polled by Thomson First Call.

Total worldwide revenue came in at $2.5 billion, up 9%. Domestically, Omnicom's revenue rose 13.3% to $1.4 billion while international revenue grew a more modest 3% to $1.1 billion, dragged down by the sluggish economies of Western Europe.

Organic revenue was up 8.6%, divestitures took 0.3% off the top line while foreign exchange benefits added 0.5%.

"Revenue growth continues to be solid," said CEO John Wren in a conference call Tuesday. "We haven't seen any changes in the trends we have been reporting for the last nine months."

After ending Monday with a 1.5% gain, shares of Omnicom -- the parent of ad agencies DDB and BBDO, along with media buying firm OMD and dozens of other companies - rose $4.68, or 6%, to close at $83.84.

In a note to investors, Alexia Quadrani of Bear Stearns pointed out that "net new business wins were at record levels...at close to $2 billion. This is almost double Omnicom's average quarterly rate."

Concerns, however, "include ongoing weakness in Europe, both in terms of revenue and profitability, with no sign of meaningful improvement" while foreign exchange "will likely start to work against Omnicom" in the fourth quarter.

Still, she said, "the secular trends impacting media (shift in ad dollars to non-traditional marketing) play into Omnicom's strengths given its well regarded assets in direct marketing and interactive advertising."

The combination "of strong organic growth from its non traditional business and market share gains should continue to result in above average revenue growth going forward, making [the company] one of the best plays in media in our view," Quadrani concluded.

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